The Gazette 1974

charge to £11,000. The house was only worth about £10,000, so this charge for £11,000 would sweep up all that the father had. On hearing the proposal, the father said that Michael was his only son and that he was 100 per cent behind him. Mr. Head produced the forms that had already been filled in. The father signed them and Mr. Head witnessed them there and then. On this occasion, Mr. Head, unlike Mr. Bennett, did not leave the forms with the father : nor did the father have any independent advice. It is important to notice the state of mind of Mr. Head and of the father. Mr. Head said in evidence : "Defendant asked me what in my opinion the com- pany was doing wrong and company's position. I told him. I did not explain the company's affairs very fully as I had only just taken over the account. . . . Michael said that company had a number of bad debts. I was not entirely satisfied with this. I thought the trouble was more deep seated. . . . It did not occur to me that there was any conflict of interest. I thought there was no conflict of interest. I would think the defendant relied on me implicitly to advise him about the transaction as bank manager. . . . I knew he had no other assets except Yew Tree Cottage. The father said in evidence : "I always thought Head was genuine. I have al- ways trusted him. . . . No discussion how business was doing that I can remember. I simply sat back and did what they said." The solicitor, Mr. Trethowan, said of the father : "He is straight-forward. Agrees with anyone. . . . I doubt if he understood all that Head explained to him." So the father signed the papers. Mr. Head witnessed them and took them away. The father had charged the whole of his remaining asset, leaving himself with nothing. The son and his company gained a respite. But only for a short time. Five months later, in May 1970, a receiving order was made against the son. Thereupon the bank stopped all overdraft facilities for the company. It ceased to trade. The father's solicitor; Mr. Trethowan, at once went to see Mr. Head. He said he was concerned that the father had signed the guar- antee. In due course the bank insisted on the sale of the house. In December 1971 they agreed to sell it for £9,500 with vacant possession. The family were very disappointed with this figure. It was, they said, worth much more. Estate agents were called to say so. But the judge held it was a valid sale and that the bank could take all the proceeds. The sale has not been completed because Herbert Bundy is still in possession. The bank have brought these proceedings to evict Herbert Bundy. The general rule Now let me say at once that in the vast majority of cases a customer who signs a bank guarantee or a charge cannot get out of it. No bargain will be upset which is the result of the ordinary interplay of forces. There are many hard cases which are caught by this rule. Take the case of a poor man who is homeless. He agrees to pay a high rent to a landlord just to get a roof over his head. The common law will not interfere. It is left to Parliament. Next take the case of a borrower in urgent need of money. He borrows it from the bank at high interest and it is guaranteed by a friend. The guarantor gives his bond and gets nothing in return.

The common law will not interfere. Parliament has intervened to prevent moneylenders charging excessive interest. But it has never interfered with banks. Yet there are exceptions to this general rule. There are cases in our books in which the Courts will set aside a contract, or a transfer of property, when the parties have not met on equal terms—when the one is so strong in bargaining power and the other so weak— that, as a matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall. Hitherto those exceptional cases have been treated each as a separate category in itself. But I think the time has come when we should seek to find a principle to unite them. I put on one side contracts or transactions which are voidable for fraud or misrepresentation or mistake. All those are governed by settled principles. I go only to those where there has been inequality of bargaining power, such as to merit the intervention of the Court. The categories The first category is that of "duress of goods". A typical case is when a man is in a strong bargaining position by being in possession of the goods of another by virtue of a legal right, such as by way of pawn or pledge or taken in distress. The owner is in a weak posi- tion because he is in urgent need of the goods. The stronger demands of the weaker more than is justly due: and he pays it in order to get the goods. Such a trans- action is voidable. He can recover the excess : see Green v Duckett (1883) 11 Q.B.D. 275. To which may be added the cases of "colore officii", where a man is in a strong bargaining position by virtue of his official posi- tion or public profession. He relies upon it so as to gain from the weaker—who is urgently in need—more than is justly due : see Steele v Williams (1853) 8 Exch. 625. In such cases the stronger may make his claim in good faith honestly believing that he is entitled to make his demand. He may not be guilty of any fraud or misrepre- sentation. The inequality of bargaining power—the strength of the one versus the urgent need of the other —renders the transaction voidable and the money paid to be recovered back: see Maskell v Horner [1915] 3 K.B. 106. The second category is that of the "unconscionable transaction". A man is so placed as to be in need of special care and protection and yet his weakness is exploited by another far stronger than himself so as to get his property at a gross undervalue. The typical case is that of the "expectant heir". But it applies to all cases where a man comes into property, or is expected to come into it—and then being in urgent need— another gives him ready cash for it, greatly below its true worth, and so gets the property transferred to him. Even though there be no evidence of fraud or misrepresentation, nevertheless the transaction will be set aside : see Fry v Lane (1888) 40 Ch.D. 312, 322, where Kay J. said : "The result of the decisions is that where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice, a Court of equity will set aside the transaction." This second category is said to extend to all cases where an unfair advantage has been gained by an unconscientious use of power by a stronger party against a weaker: see the cases cited in Halsbury's Laws of England, third edition, vol. 17 (1956), p. 682. The third category is that of "undue influence" usually 251